Revenue Retention Analysis: Summary
This blog post is the last in a series of posts that serve as a step-by-step guide on conducting a revenue retention analysis from start to finish. Beyond the insights you will gain, conducting the analysis will be helpful for most expansion stage companies hoping to raise expansion capital. Many venture capital firms will perform this analysis at some point during the due diligence process. Presenting this data upfront will save them time and likely impress their management teams with your “metrics-driven approach” to management.
In concluding the revenue retention series, I’d like to make a few final comments that should be kept in mind. As we’ve covered, a revenue retention analysis offers an understanding of customer spend trends and performance of various customer cohorts. It is important to remember, though, that this analysis will only uncover symptoms of potential problems and opportunities, which typically need further investigation to be fully understood.
In summary, a revenue retention analysis can provide meaningful information that will help a CEO or CFO manage their business. The analysis can reflect how well a company’s efforts to make internal improvements (product, customer support, etc.) have gone. It will allow a company to more accurately predict how much revenue customers that sign up today will contribute in the future, and as a result, allow the company to create more accurate revenue forecasts and realistic budgets. It will let companies figure out which products, product versions, and customer segments have the highest revenue retention, and guide them in optimizing their sales and marketing spend and pricing strategy.